Coinbase, one of the largest cryptocurrency exchanges in the world, has announced to suspend XRP trading following the lawsuit filed by the U.S. Securities and Exchange Commission (SEC) against Ripple and two of its topmost executives. The leading crypto exchange is going to fully suspend XRP trading on Tuesday, Jan. 19, 2021, at 1 p.m. ET and till then it will be moved into limit only trading only.
Chief Legal Officer of Coinbase, Paul Grewal, has said in a blog post that they will continue monitoring legal developments related to XRP and update their customers with as much information as available. The leading cryptocurrency exchange has assured its users that even after the suspension of XRP trading, the receiving and withdrawing functionalities for users’ XRP wallets will remain available.
Coinbase made it clear that they will continue supporting XRP in both Coinbase Custody and the self-custodial Coinbase Wallet. The exchange has made it clear that they will support an upcoming airdrop of Spark tokens (previously announced) to XRP holders.
Since the announcement of the lawsuit filed by SEC, XRP’s price has fallen by over 50%. After the written announcement by Coinbase, XRP’s price has fallen sharply from US$0.282107 to US$0.227059 within a span of 9 hours. A week back, the XRP price was hovering around US$0.492122.
Reports say one of the main reasons why Coinbase decided to drop XRP from trading is that it doesn’t want to remain a platform for something that has been alleged by the SEC as a “security”.
In the third point of the Securities And Exchange Commission’s plaintiff against Ripple Labs, Inc., Bradley Garlinghouse, and Christian A. Larsen at the United States District Court Southern District Of New York, it has been alleged:
“Ripple engaged in this illegal securities offering from 2013 to the present, even though Ripple received legal advice as early as 2012 that under certain circumstances XRP could be considered an “investment contract” and therefore a security under the federal securities laws.”
The issue has become so important to Coinbase because it is all set to go public. If they made XRP available for trade, it would have made Coinbase being considered as a platform that allows the trade of a security. This would have meant more paperwork, which they definitely wanted to avoid.
Coinbase’s decision is a huge blow for Ripple’s XRP as it has already been dropped by many other crypto exchanges including Bitstamp, San Francisco-based OKCoin, and many others.
The SEC has alleged that XRP is, in fact, a “security” as an asset class, and Ripple has till now raised US$1.3-billion in the process. SEC has claimed that the company has been selling XRP (which they have called a ‘security’) without registering or seeking an exemption for 7-years. Ripple’s management has made it clear that they will contest SEC’s charges in the court and the market fears that it will be a long-drawn legal battle.
A crypto trader and analyst, Alex Kruger, has said:
“Crypto exchanges are unregistered with the SEC (by choice, as registering carries on many burdens and increased costs) and thus it is in their best interest to not offer to trade of securities. It is for their protection, not their customers’.”